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Sorting It Out: International Trade and Protection With Heterogeneous Workers

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Author Info
Franziska Ohnsorge
Daniel Trefler

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Abstract

The two models of international trade with developed factor markets -- Heckscher-Ohlin and Specific Factors -- both suffer significant defects. For example, their predictions about the patterns of domestic production and international trade are for the most part either indeterminate or uselessly complex. The problem with these models is that the supply of factors to an industry is either perfectly elastic or perfectly inelastic. Using a model in which heterogeneous workers sort across industries we eliminate this problem. The result is a multi-good model with sharp predictions about (1) the domestic pattern of production, (2) North-North and North-South trade, (3) the demand for protection, (4) the determinants of domestic income distribution, and (5) the effect of trade on economic development.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10959.

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Date of creation: Dec 2004
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Handle: RePEc:nbr:nberwo:10959

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Find related papers by JEL classification:
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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  1. Willmann, Gerald & Blanchard, Emily, 2007. "Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy," Economics Working Papers 2007,21, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
    Other versions:
  2. Arnaud Costinot, 2007. "Heterogeneity and Trade," University of California at San Diego, Economics Working Paper Series 2008-04, Department of Economics, UC San Diego. [Downloadable!]
  3. Arnaud Costinot, 2007. "On the Origins of Comparative Advantage," University of California at San Diego, Economics Working Paper Series 2008-06, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
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